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David Becker
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Natural gas prices continued to break down on Thursday following the Department of Energy’s inventory report. The draw was larger than expected and the draw levels are now below the 5-year average for the first time in 13-months. According to a report from the National Oceanic Atmospheric Administration, the weather points to warmer than normal temperatures in most of the United States for the next weeks.

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Technical Analysis

Natural gas prices moved lower on Thursday, continuing to decline and poised to test support near the 50-day moving average at 2.73.  Resistance is seen near the 10-day moving average at 2.93. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Prices are oversold as the fast stochastic is printing a reading of 4, below the oversold trigger level of 20, which could foreshadow a correction. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

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Inventories Declined More than Expected

Natural gas in storage was 1,943 Bcf as of Friday, February 19, 2021, according to the EIA. This represents a net decrease of 338 Bcf from the previous week. Expectations were for a 278 Bcf draw. Stocks were 298 Bcf less than last year at this time and 161 Bcf below the five-year average of 2,104 Bcf. At 1,943 Bcf, total working gas is within the five-year historical range.

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